In a widely expected move, the Bank of England’s Monetary Policy Committee has voted unanimously to increase Bank Rate to 0.75%.
Interest rates are now at their highest level since February 2009 when they were cut from 1% to 0.5%.
The Bank cut the base rate to 0.25% in August 2016 before raising it back to 0.5% in November 2017.
In its meeting, the MPC agreed that the first quarter was temporary, with momentum recovering in the second quarter.
The Bank of England expects GDP to grow by around 1.75% per year on average which, “although modest by historical standards”, is slightly faster than the diminished rate of supply growth, which averages around 1.5% per year.
The MPC therefore judged that the UK economy “currently has a very limited degree of slack”. In its central projection, therefore, a small margin of excess demand emerges by late 2019 and builds thereafter, feeding through into higher growth in domestic costs than has been seen over recent years.
CPI inflation was also pushed above its 2% target to 2.4% in June
The MPC says it “continues to recognise that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal”.
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Source: The financial Reporter.